Week in Review

• It was a risk-off week for Asian equities overall, though Hong Kong saw the brunt of selling after strong year-to-date outperformance, as China’s deflation was more pronounced than expected in February, contrasting with the NPC’s target of 2% inflation, which implies massive stimulus could be on the way.
• Mainland investors bought a net nearly $8 billion worth of Hong Kong-listed stocks and ETFs on weakness this week via Southbound Stock Connect, a strong bullish signal from local traders.
• Internet earnings season rolled on this week as online recruitment platform Kanzhun beat estimates and social media platform Weibo reported mixed results.
• President Trump could visit China as soon as next month, according to statements, which would certainly increase the likelihood of a trade deal.

Key News

Asian equities were mostly higher overnight as Hong Kong and Mainland China outperformed while Indonesia and Korea underperformed.

China’s markets went risk on overnight as nearly all sectors closed higher in both Mainland China and Hong Kong. Key catalysts were optimism around potential policy moves following the National People’s Congress (NPC). Leaders will hold a key press conference on Monday. In the cards for policy include rate cuts, PBOC-led consumer-focused loans, and the further extension of the successful trade-in subsidies.

OpenAI came out with a letter to the US government saying that DeepSeek is a threat to the US’ lead in AI. The letter also suggested that the company’s models could pose an additional risk of manipulating information seen by Americans. I am not sure what the government, under the current administration, would do to address this. They already prevented the ban of TikTok.

Live streaming and gaming platform Douyu reported Q4 earnings overnight. The company is not currently profitable, and revenue and net income decreased in an ultra-competitive market. However, they were able to increase users by +6% year-over-year.

This week, the Hong Kong-listed shares of KE Holdings, or “Beike,” a popular online real estate platform, were added to the Stock Connect program, which will allow the shares to be traded by Mainland investors.

China’s deflation in February highlights how ambitious the targets laid out by leaders at the National People’s Congress (NPC), which concluded on Monday. The most important targets are GDP growth of 5% and Inflation of 2%. Consumers are still reluctant to spend, but it has been proven that targeted policies can be successful, as seen with the trade-in subsidies. Going forward, supporting the private sector, especially technology, and asset prices, especially real estate, in addition to consumer subsidies, are needed to achieve these goals.

With inflation, the cost of imports could play a large role as China hits back at the US with retaliatory tariffs. However, consumers in China do not consume imports as much as they do in the US and European Union. In fact, the level of imported goods consumed and the perceived value of imported goods have both come down significantly in recent years. So, bringing inflation up will be challenging and will require internal demand for internal goods and services to rise substantially.

Chart: Food Prices vs. Core CPI (Excl. Food & Energy)

The Hang Seng and Hang Seng Tech indexes both closed higher by +2.12% and +2.31%, respectively, on volume that increased +24% from yesterday. Mainland investors bought a net $555 million worth of Hong Kong-listed stocks and ETFs via Southbound Stock Connect. The top-performing sectors were Consumer Staples, which gained +4.14%, Health Care, which gained +4.11%, and Consumer Discretionary, which gained +3.87%. Meanwhile, the worst-performing sectors were Utilities, which fell -0.06%, Energy, which gained +0.07%, and Industrials, which gained +1.11%.

Shanghai, Shenzhen, and the STAR Board all closed higher by +1.81%, +2.05%, and +1.72%, respectively. The top-performing sectors were Consumer Staples, which gained +4.90%, Consumer Discretionary, which gained +3.60%, and Financials, which gained +2.63%. Meanwhile, the worst-performing sectors were Energy, which gained +0.45%, Utilities, which gained +0.53%, and Materials, which gained +0.94%.

Last Night’s Performance

Country/Index	Ticker	1-Day Change
China (Hong Kong)	HSI Index	2.1%
Hang Seng Tech	HSTECH Index	2.3%
Hong Kong Turnover	HKTurn Index	24.3%
HK Short Sale Turnover	HKSST Index	0.6%
Short Turnover as a % of HK Turnovr	N/A	14.3%
Southbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	0
China (Shanghai)	SHCOMP Index	1.8%
China (Shenzhen)	SZCOMP Index	2.1%
China (STAR Board)	Star50 Index	1.7%
Mainland Turnover	.chturn Index	11.6%
Nouthbound Stock Connect Net Buy/Sell (US $ Millions)	N/A	Not Available
Jing Daily China Global Luxury Index	CHINALUX Index	1.4%
Japan	NKY Index	0.7%
India	SENSEX Index	-0.3%
Indonesia	JCI Index	-2%
Malaysia	FBMKLCI Index	0.1%
Pakistan	KSE100 Index	0.4%
Philippines	PCOMP Index	0.8%
South Korea	KOSPI Index	-0.3%
Taiwan	TWSE Index	0%
Thailand	SET Index	1.2%
Singapore	STI Index	0%
Australia	AS51 Index	0.5%
Vietnam	VNINDEX Index	0%

MSCI China All Shares Index	# of Stocks	Average 1-Day Change (%)
Hong Kong Listed	152	2.91
Communication Services	9	2.45
Consumer Discretionary	30	3.87
Consumer Staples	13	4.14
Energy	7	0.07
Financials	23	2.97
Health Care	13	4.11
Industrials	19	1.12
Information Technology	10	1.72
Materials	10	2.77
Real Estate	6	3.26
Utilities	12	-0.06
Mainland China Listed	432	2.45
Communication Services	9	1.75
Consumer Discretionary	31	3.6
Consumer Staples	27	4.9
Energy	16	0.45
Financials	63	2.63
Health Care	40	2.55
Industrials	69	1.9
Information Technology	85	2.24
Materials	68	0.94
Real Estate	7	1.93
Utilities	17	0.53

US & Hong Kong Dually Listed	Ticker	1-Day Change (%)
Tencent HK	700 HK Equity	2.8
Alibaba HK	9988 HK Equity	3.3
JD.com HK	9618 HK Equity	5.3
NetEase HK	9999 HK Equity	0.2
Yum China HK	9987 HK Equity	2.6
Baozun HK	9991 HK Equity	-0.4
Baidu HK	9888 HK Equity	2.5
Autohome HK	2518 HK Equity	-0.7
Bilibili HK	9626 HK Equity	1.9
Trip.com HK	9961 HK Equity	3.5
EDU HK	9901 HK Equity	8.1
Xpeng HK	9868 HK Equity	-3.6
Weibo HK	9898 HK Equity	-0.7
Li Auto HK	2015 HK Equity	2.4
Nio Auto HK	9866 HK Equity	-6.1
Zhihu HK	2390 HK Equity	-3.8
KE HK	2423 HK Equity	8.4
Tencent Music Entertainment HK	1698 HK Equity	3.5
Meituan HK	3690 HK Equity	5.4

Hong Kong's Most Heavily Traded by Value	1-Day Change (%)
TENCENT HOLDINGS LTD	2.8
ALIBABA GROUP HOLDING LTD	3.3
XIAOMI CORP-CLASS B	1.9
BYD CO LTD-H	6.9
MEITUAN-CLASS B	5.4
SEMICONDUCTOR MANUFACTURING	1.3
PING AN INSURANCE GROUP CO-H	5.6
XPENG INC - CLASS A SHARES	-3.6
KUAISHOU TECHNOLOGY	2.5
AIA GROUP LTD	-2.5

Shanghai and Shenzhen's Most Heavily Traded by Value	1-Day Change (%)
EAST MONEY INFORMATION CO-A	4.6
KWEICHOW MOUTAI CO LTD-A	5.9
WULIANGYE YIBIN CO LTD-A	6.4
CONTEMPORARY AMPEREX TECHN-A	3.5
BYD CO LTD -A	6
PING AN INSURANCE GROUP CO-A	4.6
HITHINK ROYALFLUSH INFORMA-A	6.1
CHINA GALAXY SECURITIES CO-A	6.4
CITIC SECURITIES CO-A	3.6
SHENZHEN INFOGEM TECHNOLOG-A	15.7

Last Night's Exchange Rates, Prices, & Yields

• CNY per USD 7.24 versus 7.24 yesterday
• CNY per EUR  7.88 versus 7.86 yesterday
• Yield on 10-Year Government Bond 1.83% versus 1.86% yesterday
• Yield on 10-Year China Development Bank Bond 1.87% versus 1.87% yesterday
• Copper Price +0.09%
• Steel Price -0.06%